Patient Pipeline

A four-day series in the St. Petersburg Times revealed a little-known but enormously profitable pay-for-patients system that costs untold millions in health care dollars each year. A nationwide network of hospitals, treatment programs, and patient headhunters use questionable tactics — and collect hefty fees —for referring patients to “treatment ” they sometimes don’t need.

The series also revealed that there is virtually no regulation of patient referral services and brokers, some of whom use phony credentials to gain credibility. And few states forbid referral fees, which patient brokers often split with police, probation officers, and others in trusted positions.

 

St. Petersburg, Fla. — Elaine Goldman, a New York City schoolteacher, wanted a cure for depression. Instead, she wound up in a Los Angeles weight-loss center where she was charged $80,000 for treatment of anorexia — a disease she never had.

Edward Barlow, an Allons, Tennessee, man with crippling back pain, thought he was going to “the number one pain center in the nation.” He ended up in a Florida detoxification program, where he was told to play volleyball.

Karen Robbins, a Harbor Springs, Michigan, grandmother, was promised she’d lose weight at a fancy Florida facility. Instead, she found herself in a lockdown psychiatric hospital held against her will.

These cases aren’t flukes. Like scores of others, Goldman, Barlow, and Robbins were victims of a little-known but enormously profitable cog in America’s health care industry — the patient broker.

Working individually or for so-called referral services, patient brokers make their living by matching patients with treatment programs. Drinking too much? A broker will find you a place to dry out. Own a hospital with empty beds? A broker will find patients to fill them.

In theory, it sounds fine — sending people with problems to places that can help. In fact, critics say, many patient brokers, eager to make a buck, refer unsuspecting people to inappropriate treatment programs.

This pay-for-patients system not only hurts patients: It’s siphoning millions of dollars from insurance companies and public assistance programs, driving up health care costs for all Americans. “What we’re seeing in this area is highly organized business crime,” said Joseph Ford of the FBI’s health care fraud unit. “Some of the companies involved are built on corrupt foundations. Everyone is making money, from the bottom to the top.”

A nine-month Times investigation found that:

▼ Patient brokers can make as much as $3,000 for every patient they send into treatment. In some cases, they share these finder’s fees with school counselors, public health workers, union representatives, even police and probation officers who help steer patients into the treatment pipeline.

“Each scheme is more diabolical than the last,” said U.S. Representative John Bryant of Texas. Investigations are under way or recently completed in at least nine states: Florida, Texas, California, Georgia, Massachusetts, Vermont, Pennsylvania, Ohio, and Colorado.

▼ So great is the competition to get people into treatment that prospective patients are offered free plane rides, limousine services, vacations, beer, even bail money to get out of jail. A Michigan woman says one patient broker was so determined she stay in a Florida program that he offered to fly her husband down and treat them to a vacation at Disney World.

▼ Patients are sometimes labeled with false diagnoses so their insurance will cover their treatment. Such phony diagnoses can remain a part of the patient’s medical record for the rest of their lives. And patients sent to treatment centers hundreds of miles from home often find the 28-day programs are short-term remedies with no follow-up.

“It greatly concerns me that all over the country we have such a high percentage of people being convinced to enter short-term McTreatment programs at an exorbitant cost,” said Shirley Coletti, a local advisor to U.S. drug czar Lee Brown.

▼ Patient brokers and patient referral services are largely unregulated. In Florida and other states, employees aren’t required to be licensed or have any special training even though they routinely deal with the sick and the troubled. A number of patient brokers are ex-alcoholics and drug addicts with criminal records.

Authorities have barely begun to understand the problem. Although many major professional organizations consider referral fees unethical, federal law does not ban kickbacks unless they involve a public assistance program such as Medicare. Few states have laws that even address the question of kickbacks for referrals.

“These people have no ethics at all. They’re morally bankrupt,” said Paul McDevitt, a licensed Massachusetts mental health counselor. “They’re like the grave robbers in old England who provided cadavers for the medical schools. The grave robbers of today are taking the bodies of those so confused as to be dead and shipping them out to treatment centers where they never get well. And the doctors who are the pillars of society are still reaping the benefits and still never asking where the bodies come from.”

 

Where the Money Is

Referral services. Patient brokers. Headhunters. Call them what you will, they’re the product of free-flowing insurance money and a glut of hospital beds.

Experts say the explosion in treatment facilities in the 1980s was fueled by the narcissism of the “me decade,” a time when it became almost trendy to seek professional help for emotional problems. Between 1980 and 1990, the number of beds in private U.S. psychiatric hospitals more than doubled, swelling from 17,157 to 45,143.

“The enormous growth in psychiatric beds was largely from investor-owned hospitals,” said Dr. Jerry Wiener, president elect of the American Psychiatric Association. “It was believed huge revenues would be available.”

And they were. Beginning in the 1970s, most insurance companies agreed to cover inpatient treatment for substance abuse and psychiatric care. Public assistance programs such as Medicare and Medicaid offered similar benefits.

With insurance paying up to $1,000 or more per patient a day, the bounty was too much to resist. Finding people to fill all those beds has spawned a well-organized network linking treatment centers willing to pay for patients with services that are only too happy to supply them.

Patient brokers have sprung up around the United States and Canada “because they’ve found a lucrative trade niche that no one was filling,” says Marek Laas, a former Medicaid fraud prosecutor in Massachusetts. “It’s like Willie Sutton said when he was asked why he robbed banks: ‘That’s where the money is.’”

For Jack Coscia, the money amounted to hundreds of thousands of dollars, according to a 1993 civil fraud lawsuit the federal government has filed against him.

In one of the more creative schemes to date, Coscia and a partner opened a suburban Philadelphia referral service that specialized in marketing drug treatment to Amtrak employees. Through contacts in the Rail Workers’ Union, he allegedly targeted Amtrak employees who were nearing the end of seasonal furloughs and were subject to drug testing. Coscia’s pitch to the workers: Stay in a comfortable hospital and get clean before you have to return to work.

What Coscia didn’t tell workers was that his service, Matrix Health Management, was getting kickbacks from a Pennsylvania hospital for every patient sent for treatment, the lawsuit says. In all, the Northwestern Institute of Psychiatry treated 800 rail workers and their dependents. The cost to taxpayers: $11 million for the treatment and another $1 million for Matrix, Amtrak says.

How did Coscia find so many patients? He paid Amtrak counselors and union officials for every worker they referred to him, the lawsuit alleges. And, the lawsuit adds, he offered union officials hotel rooms, entertainment, and a $1,025 beach house rental in Ocean City, New Jersey.

Coscia also found a ready supply of patients in United Steel Workers locals. Many wound up on planes to distant treatment centers, says Sharon Michaels, president of the local in Hammond, Indiana. “The manager of our plant kept asking why union members had to go to Florida or California for treatment,” said Michaels. “And our insurance company didn’t like paying for the air fare far away.”

After learning of the allegations against Coscia in Philadelphia, Michaels said she would try to sever her union’s relationship with him. “I don’t want to be involved in anything that might be crooked,” she said.

Coscia’s attorney, Harold Kane, said there was nothing wrong with referring steel workers to Florida or California for treatment, and that they likely were sent to the best hospitals Coscia could find. Kane said prosecutors filed a civil complaint against Coscia because they couldn’t support criminal charges. “Jack Coscia intends to win this case, and Jack Coscia feels he has done nothing wrong,” Kane said.

In its lawsuit against Coscia, the government spelled out what referral services and treatment centers already knew: “Each new patient is a new business opportunity.”

 

“A Waste of Time”

The opportunities are as plentiful as there are people in need of help.

People such as Bill Holdgrafer, a Philadelphia engineering manager seeking psychotherapy for his depression. Holdgrafer, 38, was stuck with a $1,800 bill for treatment a patient broker promised would be covered by insurance. “It seems like all they wanted to do was hustle me off someplace so they could get a commission,” Holdgrafer said. “I really didn’t feel like they had my best interests at heart.”

People such as Donald Loomis, a disabled Michigan man whose mother contacted a Hernando County referral service to help rid her son of a 20-year alcohol problem. Loomis, who had cocktails on his plane ride to Florida, agreed to admit himself because the Tarpon Springs center sounded like a beach resort. U.S. taxpayers have been billed $31,000 for his rehabilitation, he said. “I didn’t get nearly any type of help for my alcoholism,” said Loomis, 52. “It was a waste of time.”

And people such as 18-year-old Cephas Griffin of Warren, Ohio, who was told by a patient broker he could avoid going to jail on a probation violation only by admitting himself to a psychiatric hospital in Clearwater, Florida.

“The way he described it to me it was like a resort,” Griffin said. “He said I get to go to the beach every week.” Griffin’s mother, Rose, said the patient broker told her the family’s insurance would cover all treatment costs, but her husband is being billed thousands of dollars.

“I was at a vulnerable state, and here he offered me some help that sounded legitimate and wasn’t costing me anything,” Mrs. Griffin said. “When you’ve got a kid that you know is not a bad kid but is in trouble . . . you’ll take anything that’s offered to you.”

Monica Durick worked as a marketer for a Dade County treatment center until leaving the business altogether earlier this year. She described the majority of patient brokers this way: “These people will kill you for a patient. It was cutthroat.”

 

Positions of Trust

Some patient brokers have other jobs. And they have used those trusted positions to steer patients to distant treatment centers.

Take Tony Pace, director of a Toronto counseling center called Family Plus. According to documents filed in a recent lawsuit, Pace also acted as a patient broker, referring clients to several U.S. programs, including Future Steps, a now-closed treatment center owned by Andrew Siegel.

Last April, Siegel agreed to pay $900 and plane fare for every patient that Family Plus referred to Future Steps, Pace said in a sworn statement. Pace’s commission would be reduced, however, if a patient failed to remain in rehab the full 30 days, records show.

Pace’s statement was taken as part of a lawsuit Siegel filed against Metropolitan General Hospital in Pinellas Park, Florida. The hospital rescinded Siegel’s contract to treat patients there after investigating allegations that he was soliciting pregnant drug addicts from out of state for treatment paid by Florida taxpayers.

Pace, in his statement, said American hospitals kept him in business. “The only time we do make any money is when we refer to the United States,” he said. “In a nutshell, the American hospitals pay for our operation here.”

Then there’s Robert Paul Long Jr., a mill worker who also serves as an employee assistance professional for United Steel Workers Local No. 1219 in Pittsburgh. In his position, Long is supposed to provide unbiased guidance to coworkers with drug or alcohol problems.

The Employee Assistance Professionals Association, a national organization to which Long belongs, requires in its code of ethics that members advocate community treatment. Why then, the union wants to know, did Long funnel at least six steel workers through a Florida patient referral service headed by Renee Steely?

“I’ve asked [Long] why so many of our members were being sent to Florida,” said Local No. 1219 president Don Thomas. “I’ve been jumping on his case about it. He told me he doesn’t place our members [in the Pittsburgh area] because the centers aren’t that good.”

Long, a recovering alcoholic, acknowledged working with the Florida service but insists he was never paid for referrals. “The mill is my only livelihood,” said Long. “I just act as a labor liaison. I’m here to help the person who needs help. If I need to get someone into treatment, [Steely] helps.”

Other recruiters have even more at stake. They’re on the public payroll. Police officers, welfare workers, school counselors, and probation officers often are on the front lines of the drug war. They make daily decisions to send people for treatment, often at taxpayer expense. And records show that some officials have been accused of taking cash for referrals.

In Tampa Bay, for example, two state agencies are investigating allegations that managers of a Pinellas County treatment program paid two employees of the state Department of Health and Rehabilitative Services $250 for every pregnant woman referred to treatment.

In Ohio, authorities are investigating allegations that probation officers accepted money to refer addicts to a local halfway house. It, in turn, sent many of its patients to treatment centers in Florida.

And in Georgia, the former head of the state prison system’s employee assistance program pleaded guilty in August 1993 to charges he accepted more than $110,000 in kickbacks to refer state employees with drug or alcohol problems to a Colorado treatment center.

John Whiddon, program administrator of Florida’s Office of Medicaid Program Integrity, says patient brokering affects virtually everyone, whether through improper treatment, bigger insurance premiums, or higher taxes. “The consequence of an improper solicitation is medically unnecessary services 99 percent of the time,” he said. “We just can’t afford it.”

 

SIDEBAR

Helping Everyone but the Patients

They’re sick. Their drug habits or emotional problems have threatened their lives, sabotaged their jobs, and ruined their marriages.

But for many Americans, the referral services they turn to for help do little but worsen a bad situation. Patients end up misdiagnosed, misplaced — and ultimately, ill-served.

Patient brokers “are taking advantage of those who are already in terrible, terrible mental and physical conditions and are not able to make decisions for themselves,” said Shirley Coletti, president of the respected Operation PAR drug treatment center in St. Petersburg. “The patient is so vulnerable. They will jump at every opportunity they can. When treatment is presented in such an attractive manner — and sounds so exciting that you can hardly wait to go — most people are not able to figure right from wrong. ”

Just ask Matthew Lachovsky. His life was hell. His marriage was crumbling, divorce court was imminent, and cocaine seemed his only escape. But at a Pontiac, Michigan, counseling center, the Detroit welder glimpsed heaven.

“They showed me a videotape of a treatment center that reminded me of a resort. It had an aerial view of the grounds and tennis courts,” Lachovsky said. “A nurse came out and gave a guy a can of soda as he was lounging by the pool. I said, ‘That’s nice.’”

He flew to sunny South Florida, albeit no resort. And his treatment at the Dade County hospital was fine — while his insurance lasted. But when the money ran out, Lachovsky was dumped at a Fort Lauderdale halfway house for indigents. There he stayed for five months, pleading with officials at Aventura Medical Center for his return plane ticket. “I was the victim of a marketing scam,” said Lachovsky, 26. “And I don’t want anybody else caught up in it.”

After hospitals and patient referral services bleed their insurance dry, many patients are released, confused and angry — but seldom cured. “I was not well when I went in, and I was not well when I came out,” Elaine Goldman of New York said of her $80,000 treatment at a Los Angeles rehab clinic. Goldman got everything from vitamin therapy to mud packs. What she didn’t get, she said, was any counseling for her depression. “It was a nightmare,” she said.